FEDERAL DEPOSIT INSURANCE CORPORATION 2019 Minority Depository Institutions Structure, Performance, and Social Impact 2019 Minority Depository Institutions Structure, Performance, and Social Impact Acknowledgments We are grateful for the leadership provided by We would also like to thank the editorial review team Presidential Management Fellow Erica A. Lee, who from the Division of Insurance and Research, the served as program manager for this interdivisional Division of Depositor and Consumer Protection, the study, outlined new research questions and Division of Risk Management Supervision, and the methodology, and guided the study to completion. Legal Division that included: Martha Ellett, Counsel; Each of the authors brought unique expertise to George French, Deputy Director, Office of Chief their sections. From the Division of Insurance and Economist; Keith Ernst, Associate Director, Consumer Research, the authors included: Eric C. Breitenstein, Research and Examination Analytics; Sandra Kerr, Financial Economist; Karyen Chu, Chief, Banking Senior Program Specialist; Margaret M. Hanrahan, Research Section; Richard D. Cofer, Jr., Regional Chief, Financial Analysis Section; Jonathan Miller, Manager; Jeffrey A. DeLuca, Senior Financial Analyst; Deputy Director for Policy and Research; Philip and Shawn E. Schreier, Financial Analyst. Shively, Associate Director, Risk Analysis; and Kathy Zeidler, Technical Writer/Editor. The authors would like to thank the many analysts from the Division of Insurance and Research and Finally, special thanks to Sam Collicchio, the Division of Depositor and Consumer Protection Shahrzad Ghabaean, Nancy Cho, and Donna Vogel for for their significant contributions to the analysis of the design and production of this publication and to minority depository institutions undertaken in the Betty J. Rudolph, National Director for Minority and study. They include: Dustin Allison, Technical Data Community Development Banking, who served as Analyst; Jeffrey A. Ayres, Senior Financial Analyst; executive sponsor. Jade Brown, Economic Research Assistant; Nicholas P. Frazier, Financial Economist; Doreen R. Eberley, Director Alexander S. Marshall, Senior Financial Analyst; Division of Risk Management Supervision Robert M. Miller, Senior Financial Economist; Christopher J. Raslavich, Economic Analyst; Diane Ellis, Director Matthew Reardon, Student Trainee; Division of Insurance and Research Kristopher Rengert, Senior Consumer Researcher; Dhruv Sharma, Senior Financial Analyst; Mark Pearce, Director Ryan T. Singer, Chief, Regulatory Analysis; Division of Depositor and Consumer Protection Courtney L. Smith, Economic Assistant; Benjamin Tikvina, Economic Analyst; and Shelley M. Yeager, Financial Analyst. 2019 Minority Depository Institutions: Structure, Performance, and Social Impact | V Contents Acknowledgments .............................................................................................................................................................V Introduction .........................................................................................................................................................................1 Executive Summary ..........................................................................................................................................................3 Demographics of MDIs .................................................................................................................................................3 Structural Change Among MDIs ..................................................................................................................................4 Geography of MDIs .......................................................................................................................................................4 Financial Performance of MDIs ...................................................................................................................................4 Social Impact of MDIs ...................................................................................................................................................5 Section 1: Demographics of MDIs ..............................................................................................................................7 Overview .........................................................................................................................................................................7 Demographics of MDIs ................................................................................................................................................7 Balance Sheet Characteristics ...................................................................................................................................10 Lending Specialty Group .............................................................................................................................................12 Section 2: Structural Change Among MDIs .........................................................................................................17 Overview .......................................................................................................................................................................17 Structural Change Among Minority Depository Institutions .................................................................................17 Number of Charters ....................................................................................................................................................17 Impact of Structural Change on the Assets Controlled by MDIs ...........................................................................21 Section 3: Geography of MDIs ...................................................................................................................................23 Overview .......................................................................................................................................................................23 The Geography of MDIs .............................................................................................................................................23 Headquarters ...............................................................................................................................................................24 Branch Offices ..............................................................................................................................................................26 Market Share ...............................................................................................................................................................30 FDIC-Insured Non-MDI Community Bank Markets Differ From MDI Markets ......................................................31 VI Section 4: Financial Performance of MDIs ...........................................................................................................35 Overview .......................................................................................................................................................................35 Financial Performance of MDIs ................................................................................................................................35 Loan Concentration and Geography ..........................................................................................................................35 Profitability and Credit Quality ...................................................................................................................................40 Revenue ........................................................................................................................................................................42 Overhead Costs ............................................................................................................................................................47 Efficiency Ratios ..........................................................................................................................................................49 Section 5: Social Impact of MDIs ............................................................................................................................55 Overview .......................................................................................................................................................................55 Social Impact of Minority Depository Institutions ..................................................................................................55 The Median Share of Service Area Population Living in LMI Tracts Is Higher Among MDIs .............................56 The Median Share of Minority Populations in Service Areas Is Higher for MDIs ................................................56 Home Mortgage Lending of MDIs ............................................................................................................................60 MDI SBA 7(a) Lending Activity ...................................................................................................................................63 MDIs Lend to Businesses in LMI Communities More Than Non-MDIs .................................................................64 MDI Borrowers Live in Communities with Higher Shares of Minority Populations